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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: Frank Pembleton who wrote (10319)	4/1/2002 9:14:57 PM
From: Cogito Ergo Sum	Read Replies (2) \| Respond to of 36161

Don't know if this was posted already Frank ? russwinter do you know if Pel's recent numbers followed these guidelines ? archives.theglobeandmail.com See ITEM #15, Exact link won't post for some reason. Rules force oil firms to restate reserves New, more stringent guidelines can cut value of assets and hurt the bottom line LILY NGUYEN Saturday, March 30, 2002 CALGARY -- A looming change in disclosure rules governing petroleum producers is throwing a spotlight on how oil and gas reserves are reported -- and forcing a number of companies to downgrade their estimations of reserves. Paramount Resources Ltd. illustrated the effect of the pending rules earlier this week when it cut 2001 oil and gas reserves by 12 per cent from 2000 in its annual report, in part because of "proposed more conservative guidelines which are expected to become a requirement in the near future." Investors drove the stock down 10 per cent to $15.15 from $16.75 in the three trading days that followed. The move came on the heels of a dramatic reserve reduction of 36 per cent from Rio Alto Exploration Ltd. last week, a major factor in the company's reported fourth-quarter loss of $171.9-million. While the company attributed the bulk of the change to a mistaken assumption that its new wells would produce at a similar rate to its old ones, it also noted the latest evaluation was conducted in line with the pending, more stringent guidelines. Rio Alto stock fell 17 per cent on the day. Reserves are a key indicator of a company's size and value, as well as the underlying resource base from which it draws production. Under existing securities regulations, companies may choose their own yard stick for evaluating the extent of their reserves. The new rules, which are being proposed by the Alberta Securities Commission in concert with the Canadian Securities Administrators -- the umbrella organization for provincial securities commissions -- would force all companies to adhere to the same standard. For companies that have been less conservative in measuring their reserves than what's called for in the proposed new guidelines, this could result in a reduction in the value and volume of their reserves. Analysts said the two senior producers are far from alone in reducing reserve estimates as other companies release their annual reports, which include reserve numbers. "Rio Alto was of course the big shocker with negative revisions, but we've seen a few of them," said Wilf Gobert, an analyst with oil and gas brokerage Peters & Co. For example, mid-sized producer Vermilion Resources Ltd. also gave investors an unpleasant surprise when it released its annual report in late February. It said evaluating reserves according to the new rules required a downward revision in proven reserves of nearly 20 per cent. Reserves were down 14 per cent overall in 2001 because the company had been able to add to its resource base through exploration and development. Junior producer Elk Point Resources Inc. also cut its 2001 proven reserves by 16 per cent "due to more conservative price and production decline forecasts." Mr. Gobert said other companies have likely tweaked reserve numbers to conform to the coming standard, but the impact is either insignificant or masked by growth through acquisitions or drilling. Under the proposed rules, "proven reserves" -- the category of reserves for which a producer is most confident -- must have a 90-per-cent probability of meeting or exceeding actual production -- what's called a P90 standard. "Proven plus probable reserves" -- the category for which a producer is less confident -- must have a 50-per-cent probability. And "proved plus probable plus possible reserves" must have a 10-per-cent probability. Stephen Murison, the ASC's lead counsel on the issue, said the effect of applying the new standards will vary between companies, depending on how conservatively they reported reserves in the past. "To the extent that anybody in the past has not been applying P90, but a much lower standard, for proven reserves, it would follow that yes, reserves down at P90 would probably be smaller than what they were in the past." Mr. Gobert said the new guidelines will likely have more of an effect on smaller, younger producers than the larger, established ones." Large companies have a greater proportion of their reserves producing for a long period of time, he explained. That gives the company more years to monitor production rates and arrive at an accurate reserves estimate. "Smaller companies and companies expanding rapidly end up with greater risk in the reserve estimates. You can avoid that risk by being really conservative in the beginning." The new standards are a result of several years of work from members of all parts of the industry, including securities watchdogs, stock exchanges, investment dealers, and petroleum trade groups. While Mr. Murison said the proposed new guidelines are the result of a larger trend toward continuous, more consistent disclosure, industry watchers said the move toward stricter standards got a push from Big Bear Exploration Ltd.'s disastrous takeover of Blue Range Resource Corp. in December, 1998. Three months after the hostile takeover, Big Bear's chief executive officer alleged that Blue Range had overstated its reserves numbers, a charge that Blue Range denied. Blue Range's reserves were then slashed by 37 per cent, and the company was placed under bankruptcy protection. Mr. Murison, who welcomed recent reserve revisions as an indication that the industry is already coming into compliance, said the new standard should go into effect by the end of the year. A proposal was released in January to solicit industry feedback. "When everybody uses the same set of standards, it helps to level the playing field," he said. "Today, the more conservative issuers get penalized because their numbers aren't as big and as aggressive, so it doesn't really seem fair."

To: Frank Pembleton who wrote (10319)	4/2/2002 1:51:46 AM
From: TheBusDriver	Read Replies (2) \| Respond to of 36161

<<I have a dislike for not wanting to play the oilpatch ... I live, I work and I breath the oilpatch>> Funny that, I feel the same way, I think it is sometimes a disadvantage to invest in your own area of work. You know too much! You think, I wouldn't invest in xyz because you have worked for them see how screwed up they are....next thing you know they are up 25%!! LOL! Seems to work for Iso though...... <<I do see the POG as a once-in-a-lifetime opportunity and since I've never been a goldbug >> Ditto again. Only I have been a gold bug for, what 15 years? Don't know what to do with myself now, the day I have waited for is nearly here, PF up 100+% and I can't find anymore cheap shares to buy.....maybe MNP?<vbg> <<if I'm going to crash and burn my portfolio, I might as well crash and burn it in style.>> Did it back in 1995. Now ex-wife froze my trading account in PM's. Bad news came out and I watched $150k evaporate, poof! Destroyed 5 years of work. Just recovering now, still taking the write down. Wayne